Public Transportation:

Federal Project Approval Process Remains a Barrier to Greater Private Sector Role and DOT Could Enhance Efforts to Assist Project Sponsors

GAO-10-19: Published: Oct 29, 2009. Publicly Released: Oct 29, 2009.

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As demand for transit and competition for available federal funding increases, transit project sponsors are increasingly looking to alternative approaches, such as public-private partnerships, to deliver and finance new, large-scale public transit projects more quickly and at reduced costs. GAO reviewed (1) the role of the private sector in U.S. public transit projects as compared to international projects; (2) the benefits and limitations of and barriers, if any, to greater private sector involvement in transit projects and how these barriers are addressed in the Department of Transportation's (DOT) pilot program; and (3) how project sponsors and DOT can protect the public interest when these approaches are used. GAO reviewed regulations, studies, and contracts and interviewed U.S., Canadian, and United Kingdom officials (identified by experts in the use of these approaches).

In the United States, the private sector role in delivering and financing transit projects through alternative approaches, such as public-private partnerships, has been more limited than in international projects. The private sector role in U.S. projects has focused more on how they are delivered rather than how they are financed, while the private sector role in international projects has focused on both project delivery and financing. Since 2000, seven new large- scale construction projects funded through FTA's Fixed Guideway Capital Investment Program--New Starts program--have been completed using one of two alternative project delivery approaches, and none of these projects included private sector financing. In 2005, Congress authorized FTA to establish a pilot program to demonstrate the advantages and disadvantages of these alternative approaches and how the New Starts Program could better allow for them. Alternative approaches can offer potential benefits such as a greater likelihood of completing projects on time and on budget, but also involve limitations such as less project sponsor control over operations. The sequential and phased New Starts process is a barrier because it is incompatible with alternative approaches and thus does not allow for work to be completed concurrently, which can lead to delays and increased costs. Under its pilot program, FTA can grant major streamlining modifications to the New Starts process for up to three project sponsors, but has not yet granted any such modifications because FTA has found that none of the projects has transferred enough risk, in particular financial responsibilities, to the private sector. FTA has the ability within its pilot program to further experiment with the use of long-standing existing tools that could encourage a greater private sector role while continuing to balance the need to protect the public interest. This includes forms of conditional funding approvals used by other DOT agencies and international governments. FTA also lacks an evaluation plan to accurately and reliably assess the pilot program's results, including the effect of its efforts to streamline the New Starts process for pilot project sponsors. Without such a plan, agencies and Congress will be limited in their decision making regarding the pilot program. Transit project sponsors protect the public interest in alternative approaches through, for example, the use of performance standards and financial assessments to evaluate the costs and benefits of proposed approaches. Other governments have established entities to assist project sponsors in protecting the public interest. These entities have better equipped project sponsors to implement alternative approaches by creating a uniform approach to developing project agreements and serving as a repository of institutional knowledge. DOT can serve as a valuable resource for transit project sponsors by broadening its current efforts, including providing technical assistance and encouraging the use of additional financial assessments, among other measures.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Originally authorized by Section 3011(c) of the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy of Users (SAFETEA-LU), FTA's Public-Private Partnership Pilot Program (Penta-P) was established to demonstrate the advantages and disadvantages of public-private partnerships for certain new fixed guideway capital projects within the New Starts program. However, the Penta-P Program was not re-authorized in Moving Ahead for Progress in the 21st Century, which was signed into law on July 6, 2012. As such, FTA was not able to implement the recommendation to incorporate great flexibility in the Penta-P Program by making greater use of tools to streamline the New Starts process.

    Recommendation: To facilitate a better understanding of the potential benefits of alternative approaches in FTA's Public-Private Partnership Pilot Program, if reauthorized, the Secretary of Transportation should direct the FTA Administrator to incorporate greater flexibility, as warranted, in the Public-Private Partnership Pilot Program than has occurred to date by making greater use of existing tools such as Letters of Intent and Early Systems Work Agreements in order to streamline the New Starts process.

    Agency Affected: Department of Transportation

  2. Status: Closed - Not Implemented

    Comments: Originally authorized by Section 3011(c) of the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy of Users (SAFETEA-LU), FTA?s Public-Private Partnership Pilot Program (Penta-P) was established to demonstrate the advantages and disadvantages of public-private partnerships for certain new fixed guideway capital projects within the New Starts program. However, the Penta-P Program was not re-authorized in Moving Ahead for Progress in the 21st Century, which was signed into law on July 6, 2012. As such, FTA was not able to implement the recommendation to develop a sound evaluation plan for the Penta-P Program to accurately and reliability assess the pilot programs? results.

    Recommendation: To facilitate a better understanding of the potential benefits of alternative approaches in FTA's Public-Private Partnership Pilot Program, if reauthorized, the Secretary of Transportation should direct the FTA Administrator to develop a sound evaluation plan for the Public-Private Partnership Pilot Program to accurately and reliably assess the pilot programs' results that includes key factors such as: well-defined, clear, and measurable objectives; measures that are directly linked to the program objectives; criteria for determining pilot program performance; a way to isolate the effects of the pilot program; a data analysis plan for the evaluation design; and a detailed plan to ensure that data collection, entry, and storage are reliable and error-free.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: In 2009, GAO reported that transit public-private partnerships can offer potential benefits such as greater likelihood of completing projects on time and on budget, but the federal project approval process has acted as a barrier to greater private sector involvement. GAO concluded that while the Department of Transportation (DOT) has done much to promote the potential benefits of transportation public-private partnerships in the past, it had done comparatively little to equip transit project sponsors to weigh the potential costs and trade-offs of these partnerships. GAO recommended that the Secretary of Transportation enhance DOT efforts by directing the FTA Administrator to develop guidance, provide technical assistance, and sponsor greater use of financial assessments to consider the potential costs and trade-offs of public-private partnerships. On July 6, 2012, President Obama signed into law P.L. 112-141, the Moving Ahead for Progress in the 21st Century Act. The Act directed the Secretary to (a) develop guidance, for example, on how to estimate savings the public-private partnership would produce for the public and private entities, (b) provide technical assistance by developing standard public-private partnership transaction model contracts, and (c) perform financial assessments that include the calculation of public and private benefits of a proposed public-private partnership transaction. In 2014, we confirmed that DOT launched a new website that provides technical assistance to transit agencies on areas such as financing, legal, and contracting, which complies with Congress' direction. DOT is also implementing a number of measures including drafting a notice of proposed rule-making that will help agencies identify barriers to private sector participation and updating its third party contracting requirements. As a result, transit project sponsors will be better equipped to implement transit projects that use alternative approaches and ensure that public interests are protected in public-private partnerships.

    Recommendation: To facilitate a better understanding of the potential benefits of alternative approaches in FTA's Public-Private Partnership Pilot Program, if reauthorized, the Secretary of Transportation should direct the FTA Administrator to, beyond its pilot program, build upon efforts underway in DOT to better equip transit project sponsors in implementing transit projects that use alternative approaches, including developing guidance, providing technical assistance, and sponsoring greater use of financial assessments to consider the potential costs and trade-offs.

    Agency Affected: Department of Transportation

 

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